Chapter IX
GUARANTY TRUST GOES TO RUSSIA
Soviet Govemment desire Guarantee [sic] Trust
Company to become fiscal agent in United States for all Soviet operations and
contemplates American purchase Eestibank with a view to complete linking of
Soviet fortunes with American financial interests.
William H. Coombs, reporting to the U.S. embassy in London,
June 1, 1920 (U.S. State Dept. Decimal File, 861.51/752). ("Eestibank"
was an Estonian bank)
In 1918 the Soviets faced a bewildering array of internal and
external problems. They occupied a mere fraction of Russia. To subdue the
remainder, they needed foreign arms, imported food, outside financial support,
diplomatic recognition, and — above all — foreign trade. To gain diplomatic
recognition and foreign trade, the Soviets first needed representation abroad,
and representation in turn required financing through gold or foreign
currencies. As we have already seen, the first step was to establish the Soviet
Bureau in New York under Ludwig Martens. At the same time, efforts were made to
transfer funds to the United States and Europe for purchases of needed goods.
Then influence was exerted in the U.S. to gain recognition or to obtain the
export licenses needed to ship goods to Russia.
New York bankers and lawyers provided
significant — in some
cases, critical — assistance for each of these tasks. When Professor George V.
Lomonossoff, the Russian technical expert in the Soviet Bureau, needed to
transfer funds from the chief Soviet agent in Scandinavia, a prominant Wall
Street attorney came to his assistance — using official State Department channels
and the acting secretary of state as an intermediary. When gold had to be
transferred to the United States, it was American International Corporation,
Kuhn, Loeb & Co., and Guaranty Trust that requested the facilities and used
their influence in Washington to smooth the way. And when it came to
recognition, we find American firms pleading .with Congress and with the public
to endorse the Soviet regime.
Lest the reader should
deduce — too hastily — from these
assertions that Wall Street was indeed tinged with Red, or that Red flags were
flying in the street (see frontispiece), we also in a later chapter present
evidence that the J.P. Morgan firm financed Admiral Kolchak in Siberia.
Aleksandr Kolchak was fighting the Bolsheviks, to install his own brand of
authoritarian rule. The firm also contributed to the anti-Communist United
Americans organization.
The case of Professor Lomonossoff is a detailed case history
of Wall Street assistance to the early Soviet regime. In late 1918 George V.
Lomonossoff, member of the Soviet Bureau in New York and later first Soviet
commissar of railroads, found himself stranded in the United States without
funds. At this time Bolshevik funds were denied entry into the United States;
indeed, there was no official recognition of the regime at all. Lomonossoff was
the subject of a letter of October 24, 1918, from the U.S. Department of Justice
to the Department of State.1 The letter referred to Lomonossoff's Bolshevik
attributes and pro-Bolshevik speeches. The investigator concluded, "Prof.
Lomonossoff is not a Bolshevik although his speeches constitute unequivocal
support for the Bolshevik cause." Yet Lomonossoff was able to pull strings
at the highest levels of the administration to have $25,000 transferred from the
Soviet Union through a Soviet espionage agent in Scandinavia (who was himself
later to become confidential assistant to Reeve Schley, a vice president of Chase Bank). All this with the
assistance of a member of a prominent Wall Street firm of attorneys!2
The evidence is presented in detail because the details
themselves point up the close relationship between certain interests that up to
now have been thought of as bitter enemies. The first indication of
Lornonossoff's problem is a letter dated January 7, 1919, from Thomas L.
Chadbourne of Chadbourne, Babbitt 8e Wall of 14 Wall Street (same Address as
William Boyce Thompson's) to Frank Polk, acting secretary of state. Note the
friendly salutation and casual reference to Michael Gruzenberg, alias Alexander
Gumberg, chief Soviet agent in Scandinavia and later Lomonossoff's assistant:
Dear Frank: You were kind enough to say that if I could
inform you of the status of the $25,000 item of personal funds belonging to Mr.
& Mrs. Lomonossoff you would set in motion the machinery necessary to obtain
it here for them.
I have communicated with Mr. Lomonossoff with respect to it,
and he tells me that Mr. Michael Gruzenberg, who went to Russia for Mr.
Lomonossoff prior to the difficulties between Ambassador Bakhmeteff and Mr.
Lomonossoff, transmitted the information to him respecting this money through
three Russians who recently arrived from Sweden, and Mr. Lomonossoff believes
that the money is held at the Russian embassy in Stockholm, Milmskilnad Gaten
37. If inquiry from the State Department should develop this to be not the place
where the money is on deposit, then the Russian embassy in Stockholm can give
the exact address of Mr. Gruzenberg, who can give the proper information
respecting it. Mr. Lomonossoff does not receive letters from Mr. Gruzenberg,
although he is informed that they have been written: nor have any of his letters
to Mr. Gruzenberg been delivered, he is also informed. For this reason it is
impossible to be more definite than I have been, but I hope something can be
done to relieve his and his wife's embarrassment for lack of funds, and it only
needs a little help to secure this money which belongs to them to aid them on
this side of the water.
Thanking you in advance for anything you can do, I beg to
remain, as ever,
Yours sincerely,
Thomas L.
Chadbourne.
In 1919, at the time this letter was written, Chadbourne was
a dollar-a-year man in Washington, counsel and director of the U.S. War Trade
Board, and a director of the U.S. Russian Bureau Inc., an official front company
of the U.S. government. Previously, in 1915, Chadbourne organized Midvale Steel
and Ordnance to take advantage of war business. In 1916 he became chairman of
the Democratic Finance Committee and later a director of Wright Aeronautical and
o[ Mack Trucks.
The reason Lomonossoff was not receiving letters from
Gruzenberg
is that they were, in all probability, being intercepted by one of several
governments taking a keen interest in the latter's activities.
On January 11, 1919, Frank Polk cabled the American legation in
Stockholm:
Department is in receipt of information that $25,000,
personal funds of .... Kindly inquire of the Russian Legation informally and
personally if such funds are held thus. Ascertain, if not, address of Mr.
Michael Gruzenberg, reported to be in possession of information on this
subject. Department not concerned officially, merely undertaking inquiries on
behalf of a former Russian official in this country.
Polk, Acting
Polk appears in this letter to be unaware of Lomonossoff's
Bolshevik connections, and refers to him as "a former Russian
official in this country." Be that as it may, within three days Polk
received a reply from Morris at the U.S. Legation in Stockholm:
January 14, 3 p.m. 3492. Your January 12, 3 p.m., No. 1443.
Sum of $25,000 of former president of Russian commission of
ways of communication in United States not known to Russian legation; neither
can address of Mr. Michael Gruzenberg be obtained.
Morris
Apparently Frank Polk then wrote to Chadbourne (the letter is
not included in the source) and indicated that State could find neither
Lomonossoff nor Michael Gruzenberg. Chadbourne replied on January 21, 1919:
Dear Frank: Many thanks for your letter of January 17. I
understand that there are two Russian legations in Sweden, one being the
soviet and the other the Kerensky, and I presume your inquiry was directed to
the soviet legation as that was the address I gave you in my letter, namely,
Milmskilnad Gaten 37, Stockholm.
Michael Gruzenberg's address is, Holmenkollen Sanitarium,
Christiania, Norway, and I think the soviet legation could find out all about
the funds through Gruzenberg if they will communicate with him.
Thanking you for taking this trouble and assuring you of my deep
appreciation, I remain,
Sincerely yours,
Thomas L. Chadbourne
We should note that a Wall Street lawyer
had the address of Gruzenberg, chief Bolshevik agent in Scandinavia, at a time
when the acting secretary of state and the U.S. Stockholm legation had no record
of the address; nor could the legation track it down. Chadbourne also presumed
that the Soviets were the official government of Russia, although that
government was not recognized by the United States, and Chadbourne's official
government position on the War Trade Board would require him to know that.
Frank Polk then cabled the American legation at Christiania,
Norway, with the address of Michael Gruzenberg. It is not known whether Polk
knew he was passing on the address of an espionage agent, but his message was as
follows:
To American Legation, Christiania. January 25, 1919. It is
reported that Michael Gruzenberg is at Holmenkollen Sanitarium. Is it possible
for you to locate him and inquire if he has any knowledge respecting disposition
of $25,000 fund belonging to former president of Russian mission of ways of
communication in the United States, Professor Lomonossoff.
Polk, Acting
The U.S. representative (Schmedeman) at Christiania knew
Gruzenberg well. Indeed, the name had figured in reports from Schmedeman to
Washington concerning Gruzenberg's pro-Soviet activities in Norway. Schmedeman
replied:
January 29, 8 p.m. 1543. Important. Your January 25, telegram
No. 650.
Before departing to-day for Russia, Michael Gruzenberg
informed our naval attache that when in Russia some few months ago he had
received, at Lomonossoff's request, $25,000 from the Russian Railway
Experimental Institute, of which Prof. Lomonossoff was president. Gruzenberg
claims that to-day he cabled attorney for Lomonossoff in New York, Morris
Hillquitt [sic], that he, Gruzenberg, is in possession of the money, and
before forwarding it is awaiting further instructions from the United States,
requesting in the cablegram that Lomonossoff be furnished with living expenses for himself and
family by Hillquitt pending the receipt of the money.3
As Minister Morris was traveling to Stockholm on the same
train as Gruzenberg, the latter stated that he would advise further with Morris
in reference to this subject.
Schmedeman
The U.S. minister traveled with Gruzenberg to Stockholm where he
received the following cable from Polk:
It is reported by legation at Christiania that Michael
Gruzenberg, has for Prof. G. Lomonossoff, the . . . sum of $25,000, received
from Russian Railway Experimental Institute. If you can do so without being
involved with Bolshevik authorities, department will be glad for you to
facilitate transfer of this money to Prof. Lomonossoff in this country. Kindly
reply.
Polk, Acting
This cable produced results, for on February 5, 1919, Frank
Polk wrote to Chadbourne about a "dangerous bolshevik agitator,"
Gruzenberg:
My Dear Tom: I have a telegram from Christiania indicating
that Michael Gruzenberg has the $25,000 of Prof. Lomonossoff, and received it
from the Russian Railway Experimental Institute, and that he had cabled Morris
Hillquitt [sic], at New York, to furnish Prof. Lomonossoff money for
living expenses until the fund in question can be transmitted to him. As
Gruzenberg has just been deported from Norway as a dangerous bolshevik agitator,
he may have had difficulties in telegraphing from that country. I understand he
has now gone to Christiania, and while it is somewhat out of the department's
line of action, I shall be glad, if you wish, to see if I can have Mr.
Gruzenberg
remit the money to Prof. Lomonossoff from Stockholm, and am telegraphing our
minister there to find out if that can be done.
Very sincerely, yours,
Frank L. Polk
The telegram from Christiania referred to in Polk's letter
reads as follows:
February 3, 6 p.m., 3580. Important. Referring department's
january 12, No. 1443, $10,000 has now been deposited in Stockholm to my order
to be forwarded to Prof. Lomonossoff by Michael Gruzenberg, one of the former
representatives of the bolsheviks in Norway. I informed him before accepting
this money that I would communicate with you and inquire if it is your wish
that this money be forwarded to Lomonossoff. Therefore I request instructions as to my
course of action.
Morris
Subsequently Morris, in Stockholm, requested disposal
instructions for a $10,000 draft deposited in a Stockholm bank. His phrase
"[this] has been my only connection with the affair" suggests that
Morris was aware that the Soviets could, and probably would, claim this as an
officially expedited monetary transfer, since this action implied approval
by the U.S. of such monetary transfers. Up to this time the Soviets had been
required to smuggle money into the U.S.
Four p.m. February 12, 3610, Routine.
With reference to my February 3, 6 p.m., No. 3580, and your
February 8, 7 p.m., No. 1501. It is not clear to me whether it is your wish for
me to transfer through you the $10,000 referred to Prof. Lomonossoff. Being
advised by Gruzenberg that he had deposited this money to the order of
Lomonossoff in a Stockholm bank and has advised the bank that this draft could
be sent to America through me, provided I so ordered, has been my only
connection with the affair. Kindly wire instructions.
Morris
Then follows a series of letters on the transfer of the
$10,000 from A/B Nordisk Resebureau to Thomas L. Chadbourne at 520 Park Avenue,
New York City, through the medium of the State Department. The first letter
contains instructions from Polk, on the mechanics of the transfer; the second,
from Morris to Polk, contains $10,000; the third, from Morris to A/B Nordisk
Resebureau, requesting a draft; the fourth is a reply from the bank with a
check; and the fifth is the acknowledgment.
Your February 12, 4 p.m., No. 3610.
Money may be transmitted direct to Thomas L. Chadbourne, 520
Park Avenue, New York City,
Polk, Acting
* * * * *
Dispatch, No. 1600, March 6, 1919:
The Honorable the Secretary of State,
Washington
Sir: Referring to my telegram, No. 3610 of February 12, and
to the department's reply, No. 1524 of February 19 in regard to the sum of
$10,000 for Professor Lomonossoff, I have the honor herewith to inclose
a copy of a letter which I addressed on February 25 to A.
B. Nordisk Resebureau, the bankers with whom this money was deposited; a copy
of the reply of A. B. Nordisk Resebureau, dated February 26; and a copy of my
letter to the A. B. Nordisk Resebureau, dated February 27.
It will be seen from this correspondence that the bank was
desirous of having this money forwarded to Professor Lomonossoff. I explained to
them, however, as will be seen from my letter of February 27, that I had
received authorization to forward it directly to Mr. Thomas L. Chadbourne, 520
Park Avenue, New York City. I also inclose herewith an envelope addressed to Mr.
Chadbourne, in which are inclosed a letter to him, together with a check on the
National City Bank of New York for $10,000.
I have the honor to be,
sir, Your
obedient servant,
Ira N. Morris
* * * * *
A. B. Nordisk Reserbureau,
No. 4 Vestra
Tradgardsgatan, Stockholm.
Gentlemen: Upon receipt of your letter of January 30, stating
that you had received $10,000 to be paid out to Prof. G. V. Lomonossoff, upon my
request, I immediately telegraphed to my Government asking whether they wished
this money forwarded to Prof. Lomonossoff. I am to-day in receipt of a reply
authorizing me to forward the money direct to Mr. Thomas L. Chadbourne, payable
to Prof. Lomonossoff. I shall be glad to forward it as instructed by my
Government.
I am, gentlemen,
Very truly, yours,
Ira N. Morris
* * * * *
Mr. I. N. Morris,
American Minister,
Stockholm
Deal Sir: We beg to acknowledge the receipt of your favor of
yesterday regarding payment of dollars 10,000 — to Professor G. V.
Lomonossoff,
and we hereby have the pleasure to inclose a check for said amount to the order
of Professor G. V. Lomonossoff, which we understand that you are kindly
forwarding to this gentleman. We shall be glad to have your receipt for same,
arid beg to remain,
Yours, respectfully,
A. B. Nordisk
Reserbureau
E. Molin
* * * * *
A. B. Nordisk Resebureau.
Stockholm
Gentlemen: I beg to acknowledge receipt of your letter of
February 26, inclosing a check for $10,000 payable to Professor G. V.
Lomonossoff. As I advised you in my letter of February 25, I have been
authorized to forward this check to Mr. Thomas L. Chadbourne, 520 Park Avenue,
New York City, and I shall forward it to this gentleman within the next few
days, unless you indicate a wish to the contrary.
Very truly, yours,
Ira N. Morris
Then follow an internal State Department memorandum and
Chadbourne's acknowledgment:
Mr. Phillips to Mr. Chadbourne, April 3, 1919.
Sir: Referring to previous correspondence regarding a
remittance of ten thousand dollars from A. B. Norsdisk Resebureau to Professor
G. V. Lomonossoff, which you requested to be transmitted through the American
Legation at Stockholm, the department informs you that it is in receipt of a
dispatch from the American minister at Stockholm dated March 6, 1919, covering
the enclosed letter addressed to you, together with a check for the amount
referred to, drawn to the order to Professor Lomonossoff.
I am, sir, your obedient servant
William Phillips,
Acting Secretary of
State.
Inclosure: Sealed letter addressed Mr. Thomas L. Chadbourne,
inclosed with 1,600 from Sweden.
* * * * *
Reply of Mr. Chadbourne, April 5, 1919.
Sir: I beg to acknowledge receipt of your letter of April 3,
enclosing letter addressed to me, containing check for $10,000 drawn to the
order of Professor Lomonossoff, which check I have to-day delivered.
I beg to remain, with great respect,
Very truly, yours,
Thomas L. Chadbourne
Subsequently the Stockholm legation
enquired concerning Lomonossoff's address in the U.S. and was informed by the
State Department that "as far as the department is aware Professor
George V. Lomonossoff can be reached in care of Mr. Thomas L. Chadbourne, 520
Park Avenue, New York City."
It is evident
that the State Department, for the reason
either of personal friendship between Polk and Chadbourne or of
political
influence, felt it had to go along and act as bagman for a Bolshevik
agent — just ejected from Norway. But why would a prestigious
establishment law firm be so intimately interested in the health and
welfare of
a Bolshevik emissary? Perhaps a contemporary State Department report
gives the
clue:
Martens, the Bolshevik representative, and Professor
Lomonossoff are banking on the fact that Bullitt and his party will make a
favorable report to the Mission and the President regarding conditions in Soviet
Russia and that on the basis of this report the Government of the United States
will favor dealing with the Soviet Government as, proposed by Martens. March 29,
1919.4
It was commercial exploitation of Russia that excited Wall
Street, and Wall Street had lost no time in preparing its program. On May 1,
1918 — an auspicious date for Red revolutionaries — the American League to Aid and
Cooperate with Russia was established, and its program approved in a conference
held in the Senate Office Building, Washington, D.C. The officers and executive
committee of the league represented some superficially dissimilar factions. Its
president was Dr. Frank J. Goodnow, president of Johns Hopkins University. Vice
presidents were the ever active William Boyce Thompson, Oscar S. Straus, James
Duncan, and Frederick C. Howe, who wrote Confessions of a Monopolist, the
rule book by which monopolists could control society. The Treasurer was George
P. Whalen, vice president of Vacuum Oil Company. Congress was represented by
Senator William Edgar Borah and Senator John Sharp Williams, of the Senate
Foreign Relations Committee; Senator William N. Calder; and Senator Robert L.
Owen, chairman of the Banking and Currency Committee. House members were Henry
R. Cooper and Henry D. Flood, chairman of the House Foreign Affairs Committee.
American business was represented by Henry Ford; Charles A. Coffin, chairman of
the board of General Electric Company; and M. A. Oudin, then foreign manager of
General Electric. George P. Whalen represented Vacuum Oil Company, and Daniel
Willard was president of the Baltimore & Ohio Railroad. The more overtly
revolutionary element was represented by Mrs. Raymond Robins, whose name was
later found to be prominent in the Soviet Bureau files and in the Lusk Committee
hearings; Henry L. Slobodin, described as a "prominent patriotic
socialist"; and Lincoln Steffens, a domestic Communist of note.
In other words, this was a hybrid executive committee; it
represented domestic revolutionary elements, the Congress of the United States,
and financial interests prominently involved with Russian affairs.
Approved by the executive committee was a program that
emphasized the establishment of an official Russian division in the U.S.
government "directed by strong men." This division would enlist the
aid of universities, scientific organizations, and other institutions to study
the "Russian question," would coordinate and unite organizations
within the United States "for the safeguarding of Russia," would
arrange for a "special intelligence committee for the investigation of the
Russian matter," and, generally, would itself study and investigate what
was deemed to be the "Russian question." The executive committee then
passed a resolution supporting President Woodrow Wilson's message to the Soviet
congress in Moscow and the league affirmed its own support for the new Soviet
Russia.
A few weeks later, on May 20, 1918, Frank J. Goodnow and
Herbert A. Carpenter, representing the league, called upon Assistant Secretary
of State William Phillips and impressed upon him the necessity for establishing
an "official Russian Division of the Government to coordinate all Russian
matters. They asked me [wrote Phillips] whether they should take this matter up
with the President."5
Phillips reported this directly to the secretary of state and
on the next day wrote Charles R. Crane in New York City requesting his views on
the American League to Aid and Cooperate with Russia. Phillips besought Crane,
"I really want your advice as to how we should treat the league .... We do
not want to stir up trouble by refusing to cooperate with them. On the other
hand it is a queer committee and I don't quite 'get it.'"6
In early June there arrived at the State Department a letter
from William Franklin Sands of American International Corporation for Secretary
of State Robert Lansing. Sands proposed that the United States appoint an
administrator in Russia rather than a commission, and opined that "the
suggestion of an allied military force in Russia at the present moment seems to
me to be a very dangerous one."7 Sands emphasized the possibility of trade
with Russia and that this possibility could be advanced "by a well
chosen administrator enjoying the full confidence of the government"; he
indicated that "Mr. Hoover" might fit the
role.8 The letter was
passed to Phillips by Basil Miles, a former associate of Sands, with the
expression, "I think the Secretary would find it worthwhile to look
through."
In early June the War Trade Board, subordinate to the State
Department, passed a resolution, and a committee of the board comprising Thomas
L. Chadbourne (Professor Lomonossoff's contact), Clarence M. Woolley, and John
Foster Dulles submitted a memorandum to the Department of State, urging
consideration of ways and means "to bring about closer and more friendly
commercial relations between the United States and Russia." The board
recommended a mission to Russia and reopened the question whether this should
result from an invitation from the Soviet government.
Then on June 10, M. A. Oudin, foreign manager of General
Electric Company, expressed his views on Russia and clearly favored a
"constructive plan for the economic assistance" of Russia.9 In August
1918 Cyrus M. McCormick of International Harvester wrote to Basil Miles at the
State Department and praised the President's program for Russia, which McCormick
thought would be "a golden opportunity."10
Consequently, we find in mid-1918 a concerted effort by a
segment of American business — obviously prepared to open up trade — to take
advantage of its own preferred position regarding the Soviets.
In 1918 such assistance to the embryonic Bolshevik regime was
justified on the grounds of defeating Germany and inhibiting German exploitation
of Russia. This was the argument used by W. B. Thompson and Raymond Robins in
sending Bolshevik revolutionaries and propaganda teams into Germany in 1918. The
argument was also employed by Thompson in 1917 when conferring with Prime
Minister Lloyd George about obtaining British support for the emerging Bolshevik
regime. In June 1918 Ambassador Francis and his staff returned from Russia and
urged President Wilson "to recognize and aid the Soviet government
of Russia."11 These reports made by the embassy staff to the State
Department were leaked to the press and widely printed. Above all, it was claimed that
delay in recognizing the Soviet Union would aid Germany "and helps the
German plan to foster reaction and counter-revolution."12 Exaggerated
statistics were cited to support the proposal — for example, that the Soviet
government represented ninety percent of the Russian people "and the other
ten percent is the former propertied and governing class .... Naturally they are
displeased."13 A former American official was quoted as saying,
"If
we do nothing — that is, if we just let things drift — we help weaken the
Russian Soviet Government. And that plays Germany's game."14 So, it was
recommended that "a commission armed with credit and good business
advice could help much."
Meanwhile, inside Russia the economic situation had become
critical and the inevitability of an embrace with capitalism dawned on the
Communist Party and its planners. Lenin crystallized this awareness before the
Tenth Congress of the Russian Communist Party:
Without the assistance of capital it will be impossible for
us to retain proletarian power in an incredibly ruined country in which the
peasantry, also ruined, constitutes the overwhelming majority — and, of course,
for this assistance capital will squeeze hundreds per cent out of us. This is
what we have to understand. Hence, either this type of economic relations or
nothing ....15
Then Leon Trotsky was quoted as saying, "What we need
here is an organizer like Bernard M. Baruch."16
Soviet awareness of its impending economic doom suggests that
American and German business was attracted by the opportunity of exploiting the
Russian market for needed goods; the Germans, in fact, made an early start in
1918. The first deals made by the Soviet Bureau in New York indicate that
earlier American financial and moral support of the Bolsheviks was paying off
in the form of contracts.
The largest order in 1919-20 was contracted to Morris &
Co., Chicago meatpackers, for fifty million pounds of food products, valued at
approximately $10 million. The Morris meatpacking family was related to the
Swift family. Helen Swift, later connected with the Abraham Lincoln Center "Unity," was
married to Edward Morris (of the meatpacking firm) and was also the brother of
Harold H. Swift, a "major" in the 1917 Thompson Red Cross Mission to
Russia.
Ludwig Martens was formerly vice president of Weinberg &
Posner, located at 120 Broadway, New York City, and this firm was given a $3
million order.
Gold was the only practical means by which the Soviet Union
could pay for its foreign purchases and the international bankers were quite
willing to facilitate Soviet gold shipments. Russian gold exports, primarily
imperial gold coins, started in early 1920, to Norway and Sweden. These were
transshipped to Holland and Germany for other world destinations, including the
United States.
In August 1920, a shipment of Russian gold coins was received
at the Den Norske Handelsbank in Norway as a guarantee for payment of 3,000 tons
of coal by Niels Juul and Company in the U.S. in behalf of the Soviet
government. These coins were transferred to the Norges Bank for safekeeping. The
coins were examined and weighed, were found to have been minted before the
outbreak of war in 1914, and were therefore genuine imperial Russian coins.17
Shortly after this initial episode, the Robert Dollar Company
of San Francisco received gold bars, valued at thirty-nine million Swedish
kroner, in its Stockholm account; the gold "bore the stamp of the old Czar
Government of Russia." The Dollar Company agent in Stockholm applied to the
American Express Company for facilities to ship the gold to the United States.
American Express refused to handle the shipment. Robert Dollar, it should be
noted, was a director of American International Company; thus AIC was linked to
the first attempt at shipping gold direct to America.18
Simultaneously it was reported that three ships had left
Reval on the Baltic Sea with Soviet gold destined for the U.S. The S.S. Gauthod
loaded 216 boxes of gold under the supervision of Professor Lomonossoff —
now
returning to the United States. The S.S. Carl Line loaded 216 boxes of
gold under the supervision of three Russian agents. The S.S. Ruheleva was
laden with 108 boxes of gold. Each box contained three poods of gold valued at
sixty thousand gold rubles each. This was followed by a shipment on the S.S. Wheeling
Mold.
Kuhn, Loeb & Company, apparently acting in behalf of
Guaranty Trust Company, then inquired of the State Department concerning the
official attitude towards the receipt of Soviet gold. In a report the department
expressed concern because if acceptance was refused, then "the gold [would]
probably come back on the hands of the War Department, causing thereby direct
governmental responsibility and increased embarrassment."19
The report, written by
Merle Smith in conference with Kelley and Gilbert, argues that unless
the
possessor has definite knowledge as to imperfect title, it would be
impossible to refuse acceptance. It was anticipated that the U.S.
would be requested to melt the gold in the assay office, and it was
thereupon decided to telegraph Kuhn, Loeb & Company that no
restrictions would be imposed on the importation of Soviet gold
into the United States.
The gold arrived at the New York Assay Office and was
deposited not by Kuhn, Loeb & Company — but by Guaranty Trust Company of New
York City. Guaranty Trust then inquired of the Federal Reserve Board, which in
turn inquired of the U.S. Treasury, concerning acceptance and payment. The
superintendent of the New York Assay Office informed the Treasury that the
approximately seven million dollars of gold had no identifying marks and that
"the bars deposited have already been melted in United States mint
bars." The Treasury suggested that the Federal Reserve Board determine
whether Guaranty Trust Company had acted "for its own account, or the
account of another in presenting the gold," and particularly "whether
or not any transfer of credit or exchange transaction has resulted from the
importation or deposit of the gold."20
On November 10, 1920, A. Breton, a vice president of the
Guaranty Trust, wrote to Assistant Secretary Gilbert of the Treasury Department
complaining that Guaranty had not received from the assay office the usual
immediate advance against deposits of "yellow metal left with them for
reduction." The letter states that Guaranty Trust had received satisfactory
assurances that the bars were the product of melting French and Belgium coins,
although it had purchased the metal in Holland. The letter requested that the
Treasury expedite payment for the gold. In reply the Treasury argued that it
"does not purchase gold tendered to the United States mint or assay offices
which is known or suspected to be of Soviet origin," and in view of known
Soviet sales of gold in Holland, the gold submitted by Guaranty Trust Company
was held to be a "doubtful case, with suggestions of Soviet origin."
It suggested that the Guaranty Trust Company could withdraw the gold from the
assay office at any time it wished or could "present such further evidence
to the Treasury, the Federal Reserve Bank of New York or the Department of State
as may be necessary to clear the gold of any suspicion of
Soviet origin."21
There is no file record concerning final disposition of this
case but presumably the Guaranty Trust Company was paid for the shipment.
Obviously this gold deposit was to implement the mid-1920 fiscal agreement
between Guaranty Trust and the Soviet government under which the company became
the Soviet agent in the United States (see epigraph to this chapter).
It was determined at a later date that Soviet gold was also
being sent to the Swedish mint. The Swedish mint "melts Russian gold,
assays it and affixes the Swedish mint stamp at the request of Swedish banks or
other Swedish subjects owing the gold."22 And at the same time Olof
Aschberg, head of Svenska Ekonomie A/B (the Soviet intermediary and affiliate of
Guaranty Trust), was offering "unlimited quantities of Russian gold"
through Swedish banks.23
In brief, we can tie American International Corporation, the
influential Professor Lomonossoff, Guaranty Trust, and Olof Aschberg (whom we've
previously identified) to the first attempts to import Soviet gold into the
United States.
Guaranty Trust's interest in Soviet Russia was renewed in
1920 in the form of a letter from Henry C. Emery, assistant manager of the
Foreign Department of Guaranty Trust, to De Witt C. Poole in the State
Department. The letter was dated January 21, 1920, just a few weeks before Allen
Walker, the manager of the Foreign Department, became active in forming the
virulent anti-Soviet organization United Americans (see page 165). Emery posed
numerous questions about the legal basis of the Soviet government and banking in
Russia and inquired whether the Soviet government was the de facto government in
Russia.24 "Revolt before 1922 planned by Reds," claimed United
Americans in 1920, but Guaranty Trust had started negotiations with these same
Reds and was acting as the Soviet agent in the U.S. in mid-1920.
In January 1922 Secretary of Commerce Herbert Hoover,
interceded with the State Department in behalf of a Guaranty Trust
scheme to set up exchange relations with the "New State Bank at
Moscow." This scheme, wrote Herbert Hoover, "would not be
objectionable if a stipulation were made that all monies coming into their
possession should be used for the purchase of civilian commodities in the United
States"; and after asserting that such relations appeared to be in line
with general policy, Hoover added, "It might be advantageous to have
these transactions organized in such a manner that we know what the movement is
instead of disintegrated operations now current."25 Of course, such
"disintegrated operations" are consistent with the operations of a
free market, but this approach Herbert Hoover rejected in favor of channeling
the exchange through specified and controllable sources in New York. Secretary
of State Charles E. Hughes expressed dislike of the Hoover-Guaranty Trust
scheme, which he thought could be regarded as de facto recognition of the
Soviets while the foreign credits acquired might be used to the disadvantage of
the United States.26 A noncommittal reply was sent by State to Guaranty Trust.
However, Guaranty went ahead (with Herbert Hoover's support),27 participated in
formation of the first Soviet international bank, and Max May of Guaranty Trust
became head of the foreign department of the new Ruskombank.28
Footnotes:
1U.S.
State Dept. Decimal File, 861.00/3094.
2This
section is from U.S., Senate, Russian Propaganda, hearings before a
subcommittee of the Committee on Foreign Relations, 66th Cong., 2d sess.,
1920.
3Morris
Hillquit was the intermediary between New York banker Eugene Boissevain and
John Reed in Petrograd.
4U.S.
State Dept. Decimal File, 861.00/4214a.
15V.
1. Lenin, Report to the Tenth Congress of the Russian Communist Party,
(Bolshevik), March 15, 1921.
16William
Reswick, I Dreamt Revolution (Chicago: Henry Regnery, 1952), p. 78.
17U.S.
State Dept. Decimal File, 861.51/815.
19Ibid.,
861.51,/837, October 4, 1920.
20Ibid.,
861.51/837, October 24, 1920.
21Ibid.,
861.51/853, November 11, 1920.
23Ibid.,
316-119-785. This report has more data on transfers of Russian gold through
other countries and intermediaries. See also 316-119-846.
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